The Bank of England risks making a grave error on interest rates

The article warns that the Bank of England faces a fraught interest-rate decision as a surge in oil and gas prices from the Iran war risks reigniting inflation while growth and the labour market remain weak. MPC members are split: chief economist Huw Pill leans hawkish, advocating precautionary rate hikes to protect the 2% inflation target, while Alan Taylor urges holding rates given economic slack — a stance Governor Andrew Bailey appears to be tilting toward. Markets have flipped from pricing in cuts to expecting around two rate rises over the next 12 months. The likely immediate outcome is a hold at this week’s meeting, but further hikes are pencilled in later in the year if inflation proves persistent, a dynamic that will influence GBPUSD volatility and monetary policy expectations.